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پرسش و پاسخ با گلن نیلی-111

(111) New Tips & Hints

Since Triangles occur frequently, but are often misinterpreted, what clues exist (early on) to tell us a Triangle is, or is not, forming?

ANSWER:

Whether a Flat, Zigzag, Triangle, Diametric or Symmetrical is forming can only be determined (well in advance) by employing advanced NEoWave observations which focus on the price, time and complexity development between waves-A and B. 

Under NEoWave rules, a Flat or Zigzag is possible only IF wave-B takes the same amount of time or more as wave-A (wave-B will usually consume much more time in Flats than it will in Zigzags). If wave-B takes less time than wave-A, a Triangle, Diametric or Symmetrical is forming.

In all expanding and contracting Triangles, wave-A will be the most violent segment of the formation, even if it is the smallest in price (i.e., it should cover the most price in the least time from high to low, or from low to high). If this rule is not met, a Neutral Triangle is forming OR another non-Triangle pattern is underway. 

If wave-B is around 38.2% of wave-A, it must take less time than wave-A to be part of a NEoWave Neutral Triangle. As a result, in any A-B sequence where wave-B is around 38.2% of wave-A in price, but takes MORE time than wave-A, a Zigzag is forming, not a Neutral Triangle. As wave-B approaches 61.8% of the price of wave-A, the time it consumes will increase. As it does, wave-B may equal the time of wave-A, but if it is less, only a Triangle, Diametric or Symmetrical is possible. As wave-B exceeds 61.8% of wave-A, it normally will take more time than wave-A; if it takes less, a Triangle, Diametric or Symmetrical is forming OR the rally you are calling wave-B is just smaller wave-a of larger wave-B. 

In general, NEoWave theory tells us that the more SIMILARITY there is in price, time and complexity between adjacent waves of the same pattern, the greater the odds a NEoWave Symmetrical is forming. If time and complexity similarity exists between most of the waves, but not price similarity, a NEoWave Diametric is forming. If complexity is similar throughout, but not time and price, a Triangle is probably forming. If vast time, price and complexity differences exist between three adjacent wave segments, a Zigzag is forming. If vast time and complexity differences exist, but price coverage is about the same among three adjacent waves, a Flat is forming.

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پرسش و پاسخ با گلن نیلی-110

(110) New Tips & Hints

What percentage of profitable trades must one have to be considered successful and intelligent?

ANSWER:

The percentage of profitable trades does not determine the success of a trading year, the net profit or loss does. For example, let’s suppose commission is $10 per trade and, because you hate to lose money, you employ breakeven stops on every trade as soon as possible. After 51 weeks of trading, the record shows you entered and exited 99 trades at the same price. Your total loss, after your 99th trade, would be “commission only” in the sum of $990 ($10 x 99). But, on the last week of the year, you take your 100 trade. This time, your “breakeven” stop is not hit and the market moves substantially in your favor over the next 5 days, making you $5000 on one position (from which you subtract $10 for commission). Your success rate is only 1%, but your profit for the year is $4000. Is that a successful year? Was losing $10 on 99 trades in-a-row intelligent?

If your goal is to appear “intelligent” to your friends, it shifts focus away from risk management and toward ego satiation. When your goal is to “be right” instead of “making a profit,” your bank account will usually suffer before your ego is satisfied and before your friends are impressed. You need to ask yourself “are you involved in the markets to look intelligent to your friends, or is your focus making money”? Paradoxically, for most trades to be successful, the majority of your friends must think you are crazy (not intelligent) when the trade is initiated. Being on the side of the minority is an essential element in the success of most trades, so the “intelligent” part only occurs when the trade is over and you’ve made a nice profit. 

It is my experience that most people follow and trade markets to impress their friends and family, or to have something to do and talk about, more than to make money. Until trading becomes solely about making money (not about being right and not about excitement or staying busy), your bottom-line will suffer.

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پرسش و پاسخ با گلن نیلی-109

(109) New Tips & Hints

When plotting wave charts (as described in Chapter 2 of MEW), what happens if the high or low of the day, week or month occur twice (e.g., a low occurs March 1 and then March 31)?

ANSWER:

No matter what time frames you follow (hourly, daily, weekly, monthly, etc), you have only two ways to plot them. If the high or low clearly came first and the trend for that period is basically one directional, then you simply plot the high and low in the order they occurred. 

If a high or low occurred twice (or nearly twice) in a month (I’m using a month to make it easy to understand), then you need to examine price action to see which order will produce the most accurate representation of that month’s price action. For example, if Gold bottomed at $400 last month, then $401 the 1st of the new month, rallied to $500, then dropped back to $405 the last day of the month, plotting $401 first doesn’t help much since it basically repeats the already-plotted low at $400. So, in this situation, plot $500 first and $405 second.

On rare occasions, if it is the only way to accurately represent price action produced by the market, you could consider triple plotting (which means 3 data point combinations – either Hi-Lo-Hi or Lo-Hi-Lo). If you triple-plot, make sure all three plots occur within the time span normally reserved for two data points. NOTE’ You should never attempt to plot 4 data points within one time frame.

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پرسش و پاسخ با گلن نیلی-108

(108) New Tips & Hints

Elliott wave worked well in the 80’s, now its accuracy is disappointing. NEoWave works great today, but how can we be sure it will work well 20 years from now?

ANSWER:

This is one of the most important questions ever asked in this forum and strikes at the core differences between Elliott Wave and NEoWave. 

Elliott Wave is a concept “locked in time,” similar to (but not exactly the same) as curve-fitting a mechanical trading system. By focusing on Fibonacci relationships, with the assumption markets “should” adhere to them, and by using a static, limited group of standardized patterns, the analyst is unable to adapt to the increasingly complex trading world (which probably began with the introduction of computerized analysis and trading systems in the 1990’s). 

On the other hand, the core foundation of NEoWave is LOGIC, not Fibonacci relationships and not the subjective identification of standardized wave patterns. Instead of attempting to force the market to fit a predesigned template, NEoWave is an “after the fact,” observational process of logical induction, deduction and logical behavior. 

For example, if the concept of degree is to have any meaning, it is illogical to have a smaller degree pattern consume more price and more time than a larger degree pattern BUT I see orthodox Elliott Wave analysts constantly break this rule. As a result, their counts must change all the time. As another example, it makes no sense for a correction to stretch upward if the future uptrend is weak (you might need to think about that for a second), BUT I see orthodox Elliott Wave analysts constantly show running corrections followed by advances that are smaller than previous advances. It is also common to see orthodox Elliott Wave analysts produce multiple levels of interlocking 1’s and 2’s of smaller and smaller degree, with no attention paid to the fact the smaller patterns are subdividing more than the larger patterns. 

So, how do I know NEoWave will work for the next 20 years and beyond? Because it is not a complete, static theory, but a constantly evolving phenomenon that does not predefine or pre-suppose future reality. It does not “force” a perspective on the markets, but lets the markets (through logical deduction of behavior) define their own future and their own reality.

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پرسش و پاسخ با گلن نیلی-107

(107) New Tips & Hints

In past NEoWave TRADING reports you have talked about market declines being faster than rallies or vice versa. Can you explain how you determine such things?

ANSWER:

It is a NEoWave axiom that markets always move the fastest in the direction of the psychological trend (which can be independent of the price trend). For example, if Gold rallies $100 in 100 days, then declines $50 in the next 100 days, the psychological trend is up. 

Where NEoWave diverges from orthodox Elliott Wave, and most practitioners of technical analysis, is that this concept holds true EVEN IF the move in the direction of the trend is smaller. For example, if Gold rallies $100 in 100 days, and then is followed by a $150 decline over 200 days, NEoWave still assumes the psychological “trend” is UP because the $100 up move has a greater price/time ratio. Under NEoWave, the faster $100 move is “with the trend” (probably wave-A of a Flat in this case) even though it is smaller in price. The $150 move is slower, so usually “counter-trend” and will probably wave-B of a Flat in this situation. 

When I study wave charts, what is MOST important and what I look for first is the largest, fastest move on the chart. That is where I then begin my analysis. From there I make the assumption that largest, fastest move is WITH the trend (which means it must be wave-1, 3, 5, A, C, E, G or I and cannot be wave-2, 4, B, D, F, H or X). By applying time and retracement rules to what is left, you can almost always begin your wave analysis from the right place with the correct labels. This is the reason I virtually never have alternate wave counts on my Forecasting services (unlike most orthodox Elliott Wave practitioners) and why my wave counts usually stay on track for such long periods.

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پرسش و پاسخ با گلن نیلی-106

(106) New Tips & Hints

When you set your stop loss, what do you consider most important?

ANSWER:

Once you enter a market, the stop-loss level you choose is the most critical step (and for many, the most difficult) in the trading process. It will decide whether you get stopped out too early, whether you are risking too much of your capital on a single trade and whether you give back too much of your profits following a good run.

I searched for the answer to this question for over 20 years and finally began to arrive at some conclusions within the last 5 years, which has evolved into my NEELY RIVER trading technology. The only way you can place orders at the correct point in an uptrend or downtrend is to understand which group is “in charge” of that trend. How do you do that? According to Neely River theory, there are only three ways to trade an uptrend and three ways to trade a downtrend, no matter who you are and no matter what system or philosophy you favor. 

IF YOU BELIEVE THE MARKET IS IN AN UPTREND

1. You can attempt to pick the top, which requires you sell into new highs.

2. You can be a trend follower, which means you are buying into new highs.

3. The last way you can trade an uptrend is by buying market pull-backs AFTER a suspected low has occurred (somewhere in the 33-66% retracement area).

IF YOU BELIEVE THE MARKET IS IN AN DOWNTREND

1. You can attempt to pick the bottom, which requires you buy into new lows.

2. You can be a trend follower, which means you are selling into new lows.

3. The last way you can trade a downtrend is by selling market pull-backs AFTER a suspected high has occurred (somewhere in the 33-66% retracement area).

If a market is actually in an uptrend, all (or nearly all) those who are trading as if it is in a downtrend will lose money (so at least 50% will be wrong from the start). Next, of those in the bullish crowd, depending on the character of the uptrend (chaotic, drifting or trending), the manner in which you enter the market, place stops and exit will determine whether you make or lose money. In any uptrend, it is extremely rare for all three trading styles to do well. The market will almost always test the trading strategy and stop placement of at least 1/3 of the bullish crowd. Frequently it will test 2/3’s, which leaves only 1/3 of 1/2 (i.e., 1/6 or just 12.5%) of all traders actually making money in an uptrend (no wonder trading is so hard). 

To trade successfully, you need to trade in a manner consistent with that 12.5% group who is on the right side of the market and placing stops in the correct manner. How do you do that? Study the way each group places stops and make sure your stop placement strategy is consistent with those “in charge” (or in sync) with the current rhythm of the market. The way that is accomplished is what NEELY RIVER theory is all about and what I teach in my private, one-on-one trading classes.

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